Conference. Ruth Dreessen, Executive Vice President and Chief Financial Officer

Transcription

1 Oppenheimer Fourth Annual Industrials Conference November 17, 2009 Ruth Dreessen, Executive Vice President and Chief Financial Officer

2 Forward Looking Statement & Non-GAAP Financial Measures This presentation may contain forward-looking statements, including, in particular, statements about the plans, strategies and prospects of Texas Petrochemicals, Inc. ( the Company or TPC ). These forward-looking statements are based on the Company s current assumptions, expectations and projections about future events. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, the Company can give no assurance that these expectations will prove to be correct or that synergies or other benefits anticipated in the forward-looking statements will be achieved. Important factors, some of which may be beyond the Company s control, that could cause results to differ materially from management s expectations. This presentation may also contain non-gaap financial measures. For a presentation of the most directly comparable GAAP measures and a reconciliation of the two as well as additional detail regarding selected items impacting comparability, please visit our website at Oppenheimer Fourth Annual Industrials Conference November 17,

3 Introduction and Company Overview Business Overview Leading producer of value added products from C4 hydrocarbons Linking raw material providers with diverse chemical customers Strong long term customer relationships Locations 3 processing facilities on the Texas Gulf Coast Employees 491 permanent employees History Began as Texas Olefins Company in 1968 Houston assets acquired in 1985 Texas Petrochemicals LP formed in 1996 Restructured 2003, Latest ownership 2004 Port Neches assets acquired in 2006 Product Segments by Volume C4 Processing 79% End Markets by Volume Plastics 17% Synthetic Rubber 31% Other 9% Fuels 36% Performance Products 21% Lube & Fuel Additives 7% Oppenheimer Fourth Annual Industrials Conference November 17,

4 TPC Financial Snapshot FY 2008 FY 2009 Q1 FY 2010 Total volume 3,792 2, Total revenue $2,016 $1,377 $340 Operating margin $132 $65 $25 Adjusted EBITDA $104 $40 $20 Total volume Volume % total Revenue ($ mm) % total Op. margin (2) ($ mm) % total Op. margin/lb Crude C4 Processing (1) FY 2008 FY ,004 2,295 79% 79% 1,550 1,062 77% 77% % 57% $0.03 $0.02 Performance Products FY 2008 FY % 21% % 23% % 43% $0.05 $0.05 Butadiene Butene-1 Raffinates & MTBE Polyisobutylene (PIB) Isobutylene Products Propylene Derivatives (1) Includes Utilities, MTBE By-product, MTBE Non Core (2) Operating margin represents EBITDA before corporate SG&A allocations Oppenheimer Fourth Annual Industrials Conference November 17,

5 Crude C4 Production TPC Processing Overview Derivative Production Primary End Use Applications Hous ston and Port Ne eches Naphtha Natural Gas Liquids Ethylene Cracker Ethylene Crude C4 Extraction Butadiene Butene - 1 Raffinates Isobutylenes Synthetic Rubber Plastics Gasoline Components Housto on Isobutylenes Derivative Production Polyisobutylene Diisobutylene High Purity Isobutylene Fuel/Lube Additives Detergents Baytown Propylene Polymerization Unit Nonene Tetramer Detergents Lube Oil Additives Oppenheimer Fourth Annual Industrials Conference November 17,

6 Resilient cash flow model Challenges of 2009 withstood - cash flow positive Recovery in sight Strong future cash flow generation Favorable industry fundamentals Crude C4 supply/demand balance Positive exposure to energy curve Recent asset investment program Future return and cash flows Program in excess of maintenance levels Leading position in growing HR-PIB market Nonene and tetramer production Investment Highlights Oppenheimer Fourth Annual Industrials Conference November 17,

7 Leader across major product lines Integral to the petrochemical value chain Key for customers and suppliers Well positioned to benefit from improving industry conditions Strong, Sustainable Leadership Position Product Representative customers North American Market Positions Capacity (mm lbs/yr) Market Position Capacity Share Butadiene 2,100* #1 33%* Butene #1 40% HR-Polyisobutylene 255 #1 63% Diisobutylene 80 #1 100% Isobutylene 365 #2 34% * Does not reflect recent capacity changes in market Oppenheimer Fourth Annual Industrials Conference November 17,

8 TPC Business Model Component Purchase Cost Basis Product Sale Basis Butadiene - 55% Benchmark Processing Fee (highly correlated to WTI = >85%) Butadiene Benchmark Posting Crud de C4 Butylenes - 32% %ULR Butene-1 %ULR+Fi df t Butene-1 Isobutylene Butene-2 MTBE HPIB Raffinates % ULR + Fixed Factor Market Based Based on ic4 %ULR Butanes - 13% Based on nc4 Raffinates % ULR ibl Isobutylene Based on nc4 PIB DIB Based on ic4 Based on ic4 RGP Propylene RGP Spot Average Nonene Tetramer RGP Price + Fixed Factor RGP Price + Fixed Factor All feedstocks & products are purchased & sold on, and highly correlated to WTI, ULR, and Normal Butane nc4 = Normal Butane, ic4 = Isobutane, ULR = Unleaded Regular, RGP = Refinery Grade Propylene, ibl = Isobutylene Oppenheimer Fourth Annual Industrials Conference November 17,

9 Recent Asset Investments Significant investments for growth & operational efficiency Nonene & Tetramer - EBITDA growth PIB II - EBITDA growth New energy production equipment at all three sites Focus on maintenance and reliability Project Cost Focus Port Neches Acquisition $270 MM Growth Nonene & Tetramer $ 70 MM Growth PIB - II $ 70 MM Growth Houston Boilers $ 40 MM Energy, reliability Energy Projects $ 15 MM Energy Isobutylene $ 11 MM Energy, RM Other $ 44 MM Maintenance CAPEX Investments - positioned for the future Total $520 MM Oppenheimer Fourth Annual Industrials Conference November 17,

10 TPC plays an essential role to the nonintegrated crude C4 producers Processes 30%-40% of all crude C4 in North America Majority of Crude C4 sourced from nonintegrated producers Crude C4 production varies with ethylene operating rate and feedstock Flint Hills 3.2% Formosa 53% 5.3% Chevron Phillips 6.6% Nova 7.6% % Non-integrated 43.5% Crude C4 Industry North American Crude C4 producers Dow 12.1% 1% Other 8.8% LyondellBasell 21.7% % Integrated 56.5% Ineos 3.6% BASF 5.2% Shell 14.3% Exxon Mobil 11.7% North American Butadiene Extraction Capacity North American Capacity = 6.3 bnlbs/year North American 2009 Estimated Production = 3.2bn lbs/year Ineos 3% Equistar 19% Lanxess 4% TPC 34% (1) Joint venture of Shell (60%), BASF (24%) and Total Petrochemical (16%) Source: CMAI Exxon- Baytown/Bat on Rouge 11% Shell- Norco/Deer Park/Sabina¹ 28% Source: Jacobs Consultancy Hydrotreated CC4 Crude C4 production by feedstock (lb CC4/100 lb ethylene) Lighter cracking Heavier cracking Butadiene Butene-1 Raffinates Isobutylene Ethane cracker Source: Jacobs Consultancy 10.4 Propane cracker 18.6 Butane cracker 14.8 Flex crackerlight 30.1 Flex crackerheavy 50.4 Gas oil cracker Oppenheimer Fourth Annual Industrials Conference November 17,

11 Polyisobutylene ( PIB ) Polyisobutylene - conventional PIB and the newer highly reactive PIB ( HR-PIB ) Demand for PIB growing at GDP - HR-PIB segment growing more rapidly TPC expansion complete (145 mmlbs/yr) - Doubles capacity TPC only merchant producer of HR-PIB in North America 2009 PIB Capacity North America 2009 PIB Merchant Capacity North America North American Capacity = 940mm lbs/year Oronite 18% TPC 28% North American Merchant Capacity = 495mm lbs/year Highly Reactive PIB Conventional PIB Infinium Merchant TPC 9% 48% Capacity Ineos 52% HR PIB Merchant Capacity TPC 100 % Lubrizol 20% Source: Company data (1) Production may vary depending on product mix Ineos 25% TPC produces PIB using isobutylene sourced from LyondellBasell. Oppenheimer Fourth Annual Industrials Conference November 17,

12 Address volatility in raffinates Raffinates based specialty chemical business entry Propylene production from butylenes via metathesis Gasoline component production Industrial capacity optimization Organic Growth Opportunities Utilize existing idled capacity to competitive advantage MTBE Port Neches Dehydrogenation MTBE 2008 PIB Expansion 2007 Nonene & Tetramer Project Oppenheimer Fourth Annual Industrials Conference November 17,

13 250 Forward Projection Price Forecast, Sept ULR,nC4 - /gal BD - /lb WTI - $/ /bbl FY 2010 FY 2011 FY2012 FY 2013 FY 2014 Crude Oil - NYMEX, $/bbl Normal Butane, cpg BD - Contract, cpp Crude Oil - WTI, $/bbl Unleaded Regular, cpg Source: Texas Petrochemicals Internal Estimates and CME Group Oppenheimer Fourth Annual Industrials Conference November 17,

14 Financial Overview Oppenheimer Fourth Annual Industrials Conference November 17,

15 Naphtha based cracking C4 produces more than light (NGL) cracking Recent light cracking has resulted in a reduction in domestic crude C4 supply tightening supply/demand balance TPC sources globally Crude C4 Supply U.S. Butadiene/Ethylene Ratio and Operating Rate BD/E Ratio lb of BD per 100lb of Ethylene Production Operating Rate»[To come from CMAI] 90% 80% 70% 60% 50% Operating Rate (% ) Imports typically fixed price 4 40% F Source: CMAI U.S. Ethylene Production from Naphtha U.S. Contained BD Supply (mmlbs) 35% 4,000 30% 3,500 25% 3,000 20% 15% 2,500 10% Source: CMAI F 2,000 Source: CMAI F Oppenheimer Fourth Annual Industrials Conference November 17,

16 160 FY09 Overview Industry slowdown: BASF, Dow, et.al. announce production & staff cutbacks (Nov/Dec-08) Crud de Oil & ULR ($/b bbl) BD prices peak (Aug-08) TPC idles production assets (Dec-08) US ethylene units begin to restart, TPC restarts assets (Jan-09) Prices strengthening, volumes stabilizing (May-09) Chemicals (cpp) Crude oil hits record (July-08) Hurricane Ike, Lehman bankruptcy (Sept-08) Jan-2008 Mar-2008 May-2008 Jul-2008 Sep-2008 Nov-2008 Jan-2009 Mar-2009 May-2009 Jul WTI ($/bbl) BD-contract (cpp) Ethylene-contract_net trans (cpp) ULR ($/bbl) Oppenheimer Fourth Annual Industrials Conference November 17,

17 Adjusted EBITDA and Operating Cash Flow FY 2006 FY 2009 Adjusted Core EBITDA (1) and Net Cash from Operating Activities ($ mm) Core EBITDA Net Cash from Operating Activities WTI $94 $89 $64 $63 $97 $97 $ $38 $53 $58 $40 $ FY 2006 FY 2007 FY 2008 FY 2009 (1) Excludes Non-Core MTBE Oppenheimer Fourth Annual Industrials Conference November 17,

18 Capital Expenditures ($ mm) $100.4 $87.8 $ $ $ FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 TPC Maintenance Boiler Projects Discretionary Source: TPC Notes: Maintenance includes environmental expenditures. Boiler projects include investments to meet environmental regulations but also yielded economic returns. Oppenheimer Fourth Annual Industrials Conference November 17,

19 Selected Financial Data Q1'10 10 Q4'09 (1) Q3'09 (2) Q2'09 Q1'09 Q4'08 Q3'08 Sales Volumes (mm lbs) Sales Revenue ($mm) Sales Revenue per pound ($/lb) Segment Adjusted EBITDA ($mm) C4 Processing (18.1) Performance Products Segment Adjusted EBITDA (10.1) Segment Adjusted EBITDA per pound ($/lb) (0.01) (1) Adjusted for BI insurance recovery of $ mm. (2) Adjusted for freight payment recovery of $4.7 mm. Oppenheimer Fourth Annual Industrials Conference November 17,

20 Credit Statistics and Debt Structure ($ in millions) Credit Statistics: FY 6/30/08 FY 6/30/09 Total LT Debt $ $ EBITDA (1) Maintenance Capital (2) Total Cap Ex (3) Debt Rate Maturity Amount Revolving Credit Facility Term Loan LIBOR +3.5% June 2011 $ - LIBOR +2.5% Sep 2013 $ $ Interest Expense, Net Total LT Debt/EBITDA 2.8x 6.7x EBITDA/Interest Expense 5.5x 2.4x EBITDA/Maintenance CapEx + Int. Expense EBITDA/Total Capex + Int. Expense 3.0x 1.5x 1.0x 1.2x (1) Adjusted EBITDA, total company as reported and restated for change in turnaround accounting (2) Includes all non-discretionary capex and environmental capex. (3) Includes capitalized interest Oppenheimer Fourth Annual Industrials Conference November 17,

21 Summary FY 2009 Significant Challenges Met Major effect of Hurricane Ike Unprecedented reduction in demand and pricing Remained cash flow positive Begin recovery FY 2010 and 2011 Markets improving Strong cash flow available for deleveraging TPC well positioned to capitalize on economic recovery Margin improvement opportunities Low L risk organic growth opportunities Forward energy curves Oppenheimer Fourth Annual Industrials Conference November 17,